The Kenyan ban on gas imports has finally been lifted. But not without causing significant lasting economic cracks throughout the two East-Africa nations. For those not in the know, Kenya put a ban on all land border gas imports from Tanzania on April 24th. The ban was not only for LPG imports but also included wheat. This in turn led Tanzanian officials to react with a counter-ban on unprocessed foods, milk products and cigarettes from Kenya.
What exactly sparked off the tension between the two countries?
It was reported by Standard Digital Kenya, that officials from the Kenya Revenue Authority denied entry for 42 Tanzanian delivery trucks that were carrying wheat for a bakery in Nairobi. It is uncertain what the actual issue was for Kenya refusing entry of the delivery trucks but what followed from there was a a cold feud between the two countries that lasted almost 3 months.
The Kenyan Side
Kenyan authorities told the media that the ban on LPG that was implemented because it was discovered that most LPG consumers in Kenya were purchasing half-filled cylinders from dishonest traders. The government felt that despite doing everything in their capacity to resolve the problem, they were simply unable to prevent it and this was their latest attempt to stymie the problem in addition to their new bill which would increase penalties for cooking gas filling plants that ignore the rules. Currently the the penalties are between Sh30, 000 and Sh40, 000 but the new bill should it be passed would see the the penalties raised to Sh3 million and Sh4 million with jail a term.
The strong move was carried out to eliminate illegal filling plants which have been popping up all over Kenya and were posing new security and safety risks. There were also reports by the Energy and Water Utilities Regulatory Authority (EWURA) that dishonest traders had set up illegal gas refilling stations along highways and even a ‘big refilling station in Dar Es Salaam’, that was involved. It also served as a way to prevent cheap LPG that the government believed was coming from Zambia through the Tanzanian border.
The Kenyan government strongly believed that the constant rise of illegal refilling was only making the industry more dangerous and putting more lives at risk. The risk of disaster is increasingly high and the fact that many of these stations are in the middle of densely populated residential areas made it even worse. The government also stressed that these illegal refillers were indirectly robbing the government coffers by denying them millions of shillings in tax revenue. The government said that they had received information that many importers in Tanzania under-declare the quantity and value of the LPG or even both.
The Tanzanian Side
Tanzania on the other hand, accused the decision by the Kenyan government, to be a move by influential Kenyan firms to monopolize the gas business in the country. The Tanzanian government did however, say that they supported the ban as they had knowledge that there were several established illegal refilling plants that were refilling cylinders and selling them to Kenya. An official statement was released saying that there were about three known illegal refilling plants along the border that had to be dealt with. Associations in Tanzania on the other hand, called ‘foul play’ and said that they feel there were no good reasons to ban LPG trade between the two countries. They felt that the consequence of the ban was that companies in Kenya would be able to operate in a monopolistic setup giving them an unfair advantage over their competitors in Tanzania.
The Tanzanians also pointed out that the ban was not solely for LPG – if it was only the issue of illegal refilling of LPG, why is there also a ban on wheat? It was felt that because of this, the ban was aimed at hindering the export of processed goods from Tanzania to the Kenyan market. The sentiment in Tanzania was that, the Kenyan government wanted Tanzania to remain an exporter of raw materials and not compete with Kenya in the processed goods market.
Some prominent locals in Tanzania also pointed out that the port in Dar es Salaam has a much better system that is more efficient for importation compared to Mombasa that make gas imports from Tanzania to Kenya significantly cheaper. It is also a fact that companies without floating storage incur demurrage charges due to delays in offloading of product at Mombasa port, unlike Dar es Salaam where occupancy is relatively low.
On claims of under-declaration, the Tanzanians have said that the situation should be managed on a case-by-case basis. Most of trucks are weighed by Government weighbridges in which electronic slips from weighbridges are issued and used to check against the invoices issued by suppliers.
Kenya has been receiving LPG from Tanzania for the past 10 years and this was the first ban to have ever taken place. Each year, more than 200,000 metric tonnes crossed the border and was disseminated throughout the Kenyan LPG market.
According to the Kenyan National Bureau of Statistics, consumption of Liquefied Petroleum Gas for the six months to June dropped 38.91%. Data shows that LPG consumption for the first half of the year declined by 36,050 metric tonnes to 56,590 tonnes from 92,640 tonnes during the same period last year.
Where prices are concerned, the data shows that cooking gas prices hit the Sh2,000 in April this year, which were the highest prices since September last year. Prices are still averaging slightly above the Sh2,000 mark. The feud is thought to have caused the two nations millions upon millions in foreign exchange earnings.
Following the lift of the ban on the 23rd of July, the two countries also formed a multi-agency committee to be made up of government officials from either side. The committee is to be chaired by the two ministers of Foreign Affairs and will compromise the ministries of East African Community, trade, finance, interior, energy, agriculture, transport, tourism and will also incorporate other key government agencies as the need arises.
The feud might have left some lasting cracks between the two nations but it is hopeful that there is no bad blood left between them. Perhaps prices will come down as LPG flows into Kenya from Tanzania once again. Looking past the conflict though the new committee may help them solve greater problems that will arise in the future or even possibly lead to a better, more well connected LPG industry in East Africa.
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